Validation: key process to move from an idea to a startup

Validation of a business idea: do you know what it is? In this series of articles, we will try to give the introductory notions on the validation process, what it is and why it is useful before deciding to found your own startup.

Let’s start from the beginning.

Aspiring startup founders use to have many doubts and questions before giving life to a startup project. How to bring an idea to the market? How to turn an idea into a product or service that creates value for the market? Would people be willing to pay for your product/service? What are the tools to test the validity of the idea on the market? Are you really responding to a market need with your startup?

From the statistics, according to the last CB Insights Report we know that the second cause of startup failure is the lack of market fit. In fact, 35% of the startups fail for this reason, i.e., the product/service is not required by the market or is too far ahead of the market needs.

If you want to learn more about the causes of startup failure, also read the article Startup failure: main reasons and how to avoid it and visit the Startup school page.

How can you reduce the risk of your startup failing?

It’s easy! With the business idea validation process.

But what is a startup? And when can an idea become a startup?

Let’s answer by giving three of the most well-known definitions:

• “A startup is a temporary organization designed to look for a business model that is repeatable and scalable” – Steve Blank
• “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty” – Eric Ries
• “A startup is a company designed to grow fast” – Paul Graham

The validation of the business idea is a fundamental process, because even before proposing it on the market, there are several questions that need to be asked and several steps to complete. Moving from the idea to the actual product requires time and preliminary phases that will answer to questions such as: which market niche to turn to? How can I test this idea? What kind of problem would my product solve? How can I find my buyer persona?

This process will help you reduce the risk of failure and, although it is a path that involves investing time and financial resources, following all the steps will allow you to save money because you will arrive on the market with the certainty that your product meets the needs of a market segment and is, consequently, useful, and interesting.

In this article, we will talk about how to start the startup project, but this is only the beginning of the validation process of a business idea. In fact, this series of four articles will address the following issues in more detail:

• How to plan a startup project
• How to do a market and competitor analysis
• How to validate the client-problem couple
• How to validate the solution and get to the MVP

It is estimated that it takes at least 3 months to carry out this series of activities.

To create a startup, it is obviously essential to have a team and financial resources, but these are not the subject of this discussion, nevertheless they are essential variables to consider.

For more sparks about the startup team, we recommend also reading this article on our blog: Team and startup success: how to build it

Validation process: how to plan a startup project

Before getting to talk about your idea and thinking about how to develop it, it is important to stop for a moment to plan your startup project.

The first thing to understand is if you are really in the presence of a startup and, to find it out, you must keep in mind the following elements:

• replicability: the business model of your startup must be able to be applicable in different geographical areas and at different times without significant changes.
• scalability: you have to be able to keep growing, despite having few resources.
• innovation: a startup must bring innovation, for example by proposing products or services on the market that do not yet exist or that exist but are different from the competitors’ ones.
• temporary: the very concept of startup is temporariness.

At this point, you cannot avoid making a careful analysis of your resources. To analyze all the elements, it could be very useful to do a SWOT analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal to your company and, instead, opportunities and threats are external. Internal factors are controllable and modifiable and are, for example, human resources, financial resources, and physical resources. External factors are only hypothetical situations, but they need to be considered because they could damage the startup, especially since they are not controllable. Examples are the political environment, the economy, the market, and the relations with stakeholders. Visually, the SWOT analysis usually looks like a square with four more squares inside it, each one dedicated to the elements that make up the name of this analysis. The next step is the TOWS analysis, which consists of connecting:

• Strengths with opportunities: use strengths to capitalize on opportunities.
• Strengths with threats: use strengths to reduce and cope with threats.
• Weaknesses with opportunities: take advantage of opportunities to improve weaknesses.
• Weaknesses with threats: eliminate weaknesses to avoid threats.

At this point, you should be ready to move on to the next steps with clearer ideas and the determination needed to tackle this path.

Validation phase: definition of goals

The first activity to do is defining the goals, i.e., the reasons that lead you to want to create your startup. How do you want to become unique? And what is the value you are going to generate?

To answer these questions, it is useful to help yourself with the definition of SMART objectives:

• Specific
• Measurable
• Achievable
• Relevant
• Time-bound

Validation phase: draw a roadmap

The second fundamental activity to plan a business is to draw a roadmap, i.e., a list of all the necessary activities, and then have a plan divided into macro-objectives and steps with a defined timeline, in the short, medium, and long term with a focus on the first 3 years.

A useful tool to create a roadmap is certainly the Gantt chart, which is a very versatile tool to represent, visualize, and track the timing and progress of a project.

Setting a budget

The third activity is represented by the definition of a budget, to understand the financial requirements for the realization of the project, detailing every single item. At this stage, it is important to understand how to secure the funds to finance the activity, defining the sources and the timeline.

Define and plan targets and KPIs

The fourth activity is to define and plan targets and KPIs (Key Performance Indicators), i.e., financial, and operational objectives to measure performance.

Network

The network is an aspect that isn’t always taken into consideration, but which is actually really useful for a startup because it will ensure that your business does not have particular difficulties in making itself known and, above all, it can come to your aid when you realize that you need a profile not yet present in your team and whose skills are essential to be able to carry out the project.

Technical skills

Technical skills are a fundamental element to analyse at the beginning of the project to understand which ones are already present within your team and which ones are missing and you need to look for, as we said earlier, in your network. For example, if you plan to develop a professional app or website and there is no programmer within your team, it will be difficult to carry out your project without looking for that profile outside.

Conclusions

If you have made it this far and still intend to found your startup, then do not miss the next articles: Market and competitors’ analysis for market validation, Validation of the problem: the client-problem couple and Validation of the solution and construction of the MVP

If you are interested in startup validation, find out more on Validate your startup idea page. You will discover more interesting content and videos to watch!